Message Font: Serif | Sans-Serif
 
No. of Recommendations: 7
You need to read the entire article:

http://www.fpanet.org/journal/articles/2004_Issues/jfp1004-art6.cfm

...I like William Berstein's theory of safe SWRs, paraphrased he said it was pointless to shoot for better than 5% because there were to many other things that could go wrong in the world to screw up your plans.


I recced your response because it pointed to the article, but I DON'T agree that it's "pointless to shoot for better than 5% because there were to many other things that could go wrong in the world to screw up your plans." The 4% SWR with the 80/20 stock/bond mix (or was it 75/25?) was the one where you didn't run out of money in the 30 year period even if you retired at the worst possible time. Anything else, and there's money left at the end. There was a link recently on REHP where using I-bonds got to 6%, although some assumptions were made. It looks like there are several things that would make 6% possible. Things that jump to mind are:
-Plan to work part time if there's a portfolio hit in the first few years of retirement. If the markets are up over those first few years, no need to work.
-Reverse mortgage the house if absolutely necessary. If you happen to retire the day the bear market starts, you're on the hook. Otherwise, you come out OK.

Things to realize:
1. You don't have to put an immutable plan in place the day you retire, and keep your fingers crossed that everything will be OK. You can make decisions along the way.
2. We take 1% and 2% risks all the time. What's the risk of a heart attack if you stay at your job a few years longer than necessary? If it's greater than 1%, why be paralyzed at the 1% risk in the SWR?
Print the post  

Announcements

When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement